Director’s Time-Bar Determinations under § 315(b) are not Exempt from Judicial Review

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In Wi-Fi One, LLC v. Broadcom Corp., [2015-1945, 2015-1946](January 8, 2018) the Federal Circuit, en banc, held that the bar on judicial review of institution decisions in 35 U.S.C. §314(d) does not apply to timebar determinations made under § 315(b), overruling Achates
Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015).

Wi-Fi argued that the Director lacked authority to institute IPRs under
§315(b) because petitioner Broadcom was in privity the defendants that the prior owner of the patents (Ericsson) served with an infringement complaint more than a year before Broadcom filed the IPRs.  The Board nonetheless instituted the IPRs, finding that Wi-Fi Wi-Fi had not shown that Broadcom was in privity with the defendants in the prior litigation.  In its Final Written Decision, the challenged claims were found unpatentable.

Wi-Fi appealed the Final Written Decisions, asking the Federal Circuit to reverse or vacate the Board’s time-bar determinations, but a panel of the Federal Circuit found the §315(b) time-bar rulings nonappealable under Achates.  Wi-Fi petitioned for rehearing en banc, asking the Federal Circuit to consider whether Achates should be overruled, and hold that the Director’s § 315(b) time-bar determinations are subject to judicial review.

The majority started its analysis with the the “strong presumption”
favoring judicial review of administrative actions, including the Director’s IPR institution decisions.  In view of this strong presumption, the Federal Circuit said it would abdicate judicial review only when Congress provides a “clear and convincing” indication that it intends to prohibit review.  The Federal Circuit found no clear and convincing indication in the specific statutory language in the AIA, the specific legislative
history of the AIA, or the statutory scheme as a whole that demonstrates Congress’s intent to bar judicial review of § 315(b) time-bar determinations.

The Federal Circuit said that §315(b), which controls the Director’s authority to institute IPR that is unrelated to the Director’s preliminary  patentability assessment or the Director’s discretion not to initiate an IPR even if the threshold “reasonable likelihood” is present.  Because §314(a) does not mention the timer bar, the PTO’s position that the time-bar determination is unreviewable runs counter to the principle, as reflected in Cuozzo, that favors reading the statute to comport with, not depart from, familiar approaches to comparable issues.  The majority found this reading was consistent with the overall statutory scheme as understood through the lens of Cuozzo’s directive to examine the statutory scheme in terms of what is “closely related” to the § 314(a) determination.

The Federal Circuit concluded that whether a petitioner has complied with §315(b) has nothing to do with the patentability merits or discretion not to institute.  Thus, the majority said that the statutory scheme as a whole demonstrates that § 315 is not “closely related” to the institution decision addressed in § 314(a), and it therefore is not subject to §314(d)’s bar on judicial review.

Moreover the Federal Circuit observed that timely filing of a petition under § 315(b) is a condition precedent to the Director’s authority to act, and said that enforcing statutory limits on an agency’s authority to
act is precisely the type of issue that courts have historically reviewed.

The Federal Circuit said that the Supreme Court in Cuozzo instructed that the “strong presumption” favoring judicial review “may be overcome by ‘“clear and convincing”’ indications, drawn from ‘specific language,’ ‘specific legislative history,’ and ‘inferences of intent drawn from the statutory scheme as a whole,’ that Congress intended to bar review.” However, finding no such clear and convincing indications, the Federal Circuit held that the Director’s time-bar determinations under §315(b) are not exempt from judicial review, and overruled Achates’s contrary conclusion.

About “About”: “Less Than About 3%” Includes 4%

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In Monsanto Technology LLC v. E.I. DuPont De Nemours & Co., [2017-1032] (January 5, 2018), the Federal Circuit affirmed the PTAB’s decision that affirmed reexamination examiner’s rejection of claims of U.S. Patent No. 7,790,953, on Soybean Seed and Oil Compositions and
Methods of Making Same as anticipated by or obvious from U.S. Patent No. 6,426,448.

Monsanto argued that misconstruing the Board misconstrued the “about 3% or less” limitation in the ’953 patent to include progeny with a linolenic acid content of 4%, but the Federal Circuit found that the PTAB “reasonably interpreted” Booth’s parent line containing 4% linolenic acid “to be within the scope of ‘about 3%,’” as recited in claim 1 step (a).  The Federal Circuit found that the claim language was not instructive, so it turned to the the remainder of the specification.  The Federal Circuit noted that Exhibit 9, which purportedly had a linolenic acid content of about 3%, which included a reference that disclosed linolenic acid contents from 2.3% to 4.1%.  Thus the Federal Circuit found that the intrinsic evidence supported finding that a person having ordinary skill in the art would reasonably consider “about 3%” to encompass a range that includes 4%, and that Monsanto’s counterarguments were “unavailing.”

Monsanto further argued that the finding of anticipation was not supported by substantial evidence because the anticipation was not inherent, as the PTAB found.  The Federal Circuit disagreed, saying that inherent anticipation applies because the prior art “necessarily include the unstated limitation.”  Declarations in the record confirmed that the generation identified in the prior art would necessarily result in progeny within the scope of claim 1. Monsanto challenged the PTAB’s reliance on this “non-prior art data” and “secret data” in the declarations, but the Federal Circuit found this was appropriate, saying that Monsanto was confusing prior art with extrinsic evidence used to support what is “necessarily present” in a prior art’s teaching. Extrinsic evidence may be used to interpret the allegedly anticipating reference and to shed light on what it would have meant to a person of ordinary skill in the art. The Federal Circuit said that the declarations did not expand the
meaning of reference or serve as prior art: they demonstrate
what is inherent in the disclosure.  Second the declarations were not improper “secret data” — the were not used as prior art , but merely in support of prior art already of record.  Third, the Federal Circuit offered no rebuttal evidence to the declarations.

The Federal Circuit further affirmed the obviousness determination, noting that PTAB did not rely solely on its finding of inherent anticipation, but explained that explained that a PHOSITA would have been motivated to modify the reference to meet the requirements of the claims.

 

The Board Says that IPRs are Adjudicatory Proceedings — What will the Supreme Court Say?

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In Ericsson Inc. v. Regents of the University of Minnesota, [IPR2017-01186, IPR2017-01197, IPR2017-01200, IPR2017-01213, IPR2017-01214, IPR2017-01219 (December 19, 2017), Chief Administrative Patent Judge Ruschke, writing for an expanded panel of the PTAB, held that 11th Amendment immunity is available to States as a defense in an inter partes review.  The 11th Amendment states;

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

So in holding that the 11th Amendment applies, the Board is conceding that it is exercising the “Judicial power” of the United States.  This was the issue in Oil States energy Services, LLC v. Greene’s Energy Group, LLC where Petitioner struggled to establish that inter partes reviews are adjudicatory in nature.  In Ericsson, the Board conceded the point, stating “IPR is an adjudicatory proceeding of a federal agency from which state entities are immune.”

Ultimately the Board found that Minnesota waived its immunity by enforcing the patents in court.

To the extent that the Supreme Court in Oil States needs to decide whether IPR’s are adjudicatory proceedings involving judicial power, it has the USPTO’s admission in Ericsson.

Provisional Patent Rights

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Provisional patent rights have nothing to do with provisional patent applications, and instead refer to the rights that the owner of a published patent application has to recover a reasonable royalty for pre-issuance infringements. 35 USC §154(d) provides that a patent includes the right to obtain a reasonable royalty from any person who, after the publication of the application infringes a claim of the published application, PROVIDED THAT: (1) the infringer had actual notice of the published patent application (35 USC §154(d)(1)(B)), and (2) the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application (35 USC §154(d)(2).  Provisional rights also apply to PCT applications, but if the PCT application was not published in English, the provisional rights only apply after the USPTO receives a translation of the publication in the English language.

Actual Notice

The statute does not explain the “actual notice” requirement.  Does it require that the patent applicant provide notice to the accused infringer, or is it sufficient that the accused infringer discovers the publication itself?  The legislative history provides some guidance:

The requirement of actual notice is critical. The mere fact that the published application is included in a commercial database where it might be found is insufficient. The published applicant must give actual notice of the published application to the accused infringer and explain what acts are regarded as giving rise to provisional rights.”

Statements on Introduced Bills and Joint Resolution, Senate, S. 1948, Cong. Rec. S14719 (Nov. 17, 1999), available at http://thomas.loc.gov.

Stephens v. Tech Int’l, Inc., 393 F.3d 1269, 1276 (Fed. Cir. 2004) suggests that §154(d) requires notice from the applicant. The Federal Circuit determined that the patent owner “operated within its rights under section 154 when it notified Tech [the defendant] of its potential infringement. The letter represented Spectrum’s adherence to section 154’s requirement that Tech be placed on notice of Spectrum’s future right to obtain royalties if a patent issued in a form substantially identical to the published ‘222 application.”

As to the content of the notice, the legislative history indicates that the notice should “explain what acts are regarded as giving rise to provisional rights.”

It is generally assumed that this notice is similar to the notice requirement of 35 U.S.C. §287(a).  Based on §287(a) cases, the actual notice must identify the patent application serial number and the activity that is within the scope of the claims, and should include a proposal to abate the activity.

Substantially Identical

35 U.S.C. §154(d)(2) conditions recovery of a reasonable royalty on the infringed claim in the published application being substantially identical to a claim in the issued patent.  In Pandora Jewelry, LLC v. Chamilia, LLC, 2008 U.S. Dist. LEXIS 61064 (D. Md., August 8, 2008), the court addressed the “substantially identical” requirement of §154(d) and concluded that it was the same as that found in §252.  The court said:

Under § 252, amended patent claims are “substantially identical” to the original claims “if they are without substantive change.” Laitram Corp. v. NEC Corp., 163 F.3d 1342, 1346 (Fed. Cir. 1998) (internal quotations omitted). “[I]n determining whether substantive changes have been made, [a court] must discern whether the scope of the claims are identical, not merely whether different words are used.” Id. (citing Slimfold Mfg. Co. v. Kinkead Indus., 810 F.2d 1113, 1115 (Fed. Cir. 1987)). Although not a per se rule, “it is difficult to conceive of many situations in which the scope of a rejected claim that became allowable when amended is not substantively changed by the amendment.” Id. at 1348. Where a substantive change has been made to a claim, the allegedly harmed party has no provisional rights to assert.”

Pandora’s published patent application claimed a reversibly attached band. During prosecution, however, the applicant amended that element to be a “fixedly attached band.” According to the district court in this was done “in order to overcome the PTO’s rejection based on the prior art.” This amendment caused the court to conclude that Pandora had substantively amended the scope of the claim.  The court found no provisional patent rights because “Pandora substantively altered the scope of the claim when it amended the patent to require a permanently fixed band. Because the issued patent is not substantially identical to the published patent application, Pandora has no provisional rights to assert.”

In Classen Immunotherapies, Inc. v. Shinogi, Inc., Civil Action No. RWT-13-921 (D. Md, 1914) the Court found that Classen’s allegations under §154(d) must also be dismissed because the published applications for the ‘069 and ‘639 patents were not substantially identical to the patents that ultimately issued:

When a published patent application’s claims are amended such that their scope is changed, the patent is no longer “substantially identical” to its application. See Icon Outdoors, LLC v. Core Res., Inc., Civil Action No. RDB-11-2967, 2013 WL 2476392, at *14-15 (D. Md. June 7, 2013) (holding that a change from “waterproof or windproof” to “waterproof and windproof” in a claim describing the material of “the upper portion of [a] hunting garment” was a “substantive change” precluding the application of § 154(d)). “Although not a per se rule, ‘it is difficult to conceive of many situations in which the scope of a rejected claim that became allowable when amended is not substantively changed by the amendment.’” Pandora Jewelry, LLC v. Chamilia, LLC, Civil No. CCB-06-600, 2008 WL 3307156, at *9 (D. Md. Aug. 8, 2008) (quoting Laitram Corp. v. NEC Corp., 163 F.3d 1342, 1348 (Fed. Cir. 1998)).

Thus, the applications for the ‘069 and ‘639 patents are not “substantially identical” to the patents issued, and §154(d) simply does not apply.

Calculating the Reasonable Royalty

In Parker-Hannifin Corp. v. Champion Labs., 2008 U.S. Dist. LEXIS 61108 (N.D. Ohio 2008), Champion admitted that its oil filter infringed Parker’s Patent No. 6,983,851 and further admitted that it owed a “reasonable royalty” to the patentee for pre-issuance sales based on the provisional rights of 35 U.S.C. 154(d). Because of these admissions, the court was left only to consider the amount of reasonable royalty. The court found the reasonable royalty to be $2.00 per unit by applying the Georgia Pacific factors and to a hypothetical negotiation, awarding a total of $203,524 on these provisional rights.  However the Court did not address how the hypothetical negotiation is altered based on the fact that the right infringed was only provisional.

 

 

35 U.S.C. §154(d) Provisional Rights.—

(1) In general.— In addition to other rights provided by this section, a patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application for such patent under section 122(b), or in the case of an international application filed under the treaty defined in section 351(a) designating the United States under Article 21(2)(a) of such treaty, the date of publication of the application, and ending on the date the patent is issued—

(A)(i) makes, uses, offers for sale, or sells in the United States the invention as claimed in the published patent application or imports such an invention into the United States; or

(ii) if the invention as claimed in the published patent application is a process, uses, offers for sale, or sells in the United States or imports into the United States products made by that process as claimed in the published patent application; and

(B) had actual notice of the published patent application and, in a case in which the right arising under this paragraph is based upon an international application designating the United States that is published in a language other than English, had a translation of the international application into the English language.

(2) Right based on substantially identical inventions.— The right under paragraph (1) to obtain a reasonable royalty shall not be available under this subsection unless the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application.

(3) Time limitation on obtaining a reasonable royalty.— The right under paragraph (1) to obtain a reasonable royalty shall be available only in an action brought not later than 6 years after the patent is issued. The right under paragraph (1) to obtain a reasonable royalty shall not be affected by the duration of the period described in paragraph (1).

(4) Requirements for international applications.—

(A) Effective date.— The right under paragraph (1) to obtain a reasonable royalty based upon the publication under the treaty defined in section 351(a) of an international application designating the United States shall commence on the date of publication under the treaty of the international application, or, if the publication under the treaty of the international application is in a language other than English, on the date on which the Patent and Trademark Office receives a translation of the publication in the English language.

(B) Copies.— The Director may require the applicant to provide a copy of the international application and a translation thereof.

Concrete Allegations that Claim Elements are Not Well-Understood, Routine, or Conventional Prevents Dismissal under Rule 12(b)(6)

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In Aatrix Software, Inc. v. Green Shades Software, Inc., [2017-1452] (June 1, 2018), the Federal Circuit denied rehearing and rehearing en banc of the panel decision.  Judge Moore, concurring, explained that Aatrix stands for the unremarkable proposition that whether a claim element or combination of elements would have been well-understood, routine, and conventional to a skilled artisan in the relevant field at a particular point in time is a question of fact.  As this is a factual question, the normal procedural standards for fact questions must apply, including the rules in the Federal Rules of Civil Procedure applicable to motions to dismiss or for summary judgment and the standards in the Federal Rules of Evidence for admissions and judicial notice.

Turning to the case at hand, Judge Moore noted that when patent eligibility is challenged in a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6),
the Court must apply the well-settled Rule 12(b)(6) standard which is consistently applied in every area of law: A motion to dismiss for failure to state a claim must be
denied if “in the light most favorable to the plaintiff and with every doubt resolved in the pleader’s favor—but disregarding mere conclusory statements—the complaint states any legally cognizable claim for relief.”  Judge Moore noted that the second amended
complaint in Aatrix included “concrete allegations . . . that individual elements and the claimed combination are not well-understood, routine, or conventional activity” and that nothing in the limited record at the Rule 12(b)(6) stage refuted these allegations, so there was no legal basis to affirm the dismissal of the complaint.

 

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Anticipation Analysis Indisputably Allows for Some Flexibility; Substantial Evidence Still Supports Finding of No Anticipation

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In Microsoft Corp v. Biscotti, Inc., [2016-2080, 2016-2082, 2016-2083] (December 28, 2017), the Federal Circuit affirmed the Board’s determination in the IPR’s that Microsoft failed to show by a  preponderance of the evidence that the challenged claims of U.S. Patent No. 8,144,182 were anticipated or obvious.

The challenged patent related to “tools and techniques for providing video calling solutions” and relates to real-time video conferencing where two or more users communicate, over a network, in a conference that includes video and audio of each participant.

Microsoft appeared to challenge the standard of review of anticipation, so the Federal Circuit began by reiterating that anticipation is a question of fact subject to substantial evidence review.  Noting that the Board correctly articulated the anticipation standard, the Federal Cricuit considered whether the Board properly applied that standard. ,   anticipate the claimed invention, a prior art reference must disclose all elements of the claim within the four corners of the document, and it
must disclose those elements arranged as in the claim, the Federal Circuit.  Noting that the Board may have used wording such as  “identically” more liberally than it should have because an anticipation analysis indisputably allows for some flexibility, the Federal Circuit found that the Board’s analysis did not suffer from a misapplication of the anticipation standard.  The Federal Circuit found that the Board therefore did not require word-for-word similarity or perfection, and explicitly considered whether a POSA would “at once envisage” the combination of the claimed invention given the disconnected teachings of the reference.

However even though the Board articulated the correct standard, and applied the correct standard, this did not mean that the Board’s analysis was correct.  Microsoft argued that the Board read the prior art too narrowly, limiting certain disclosures to particular embodiments, and not applying them to all disclosed embodiments.  The Federal Circuit said although Microsoft’s arguments were not unreasonable, it does not review this question de novo; anticipation is a question of fact, reviewed for substantial evidence.  In light of this deference, the Federal Circuit affirmed the Board’s decision.

The Federal Circuit found that Microsoft’s brief on appeal with respect to one claim was more detailed and contained substantial new arguments regarding anticipation, and rejected them because they were not presented in the Petition.

 

ACINIFORM – The Right Word for the Right Shape

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It’s always rewarding to stumble across the perfect word to describe or claim an invention, and today’s word from a word a day has that potential: aciniform, which means shaped like a cluster of grapes.  This word has been used in 48 patents, and has been used in the claims of four patents.

In claiming a separator for a lithium ion battery, U.S. Patent No. 8,192,873 claimed the ceramic particles forming the separator has having an aciniform shape:

In describing carbon black, U.S. Patent 9,580,606 (Col. 5, lines 19-23) explained it was an aciniform, prudently adding a parenthetical definition given the vagaries of construing patents:

If You Try to Hide Prosecution Conduct, Then the Court will Presume You Had Something to Hide

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In Regeneron Pharmaceuticals v, Merus N.V., [16-1346] the Federal Circuit denied rehearing and rehearing en banc of the July panel decision previously discussed here, that litigation misconduct warranted a finding of inequitable conduct in patent prosecution.

Judge Newman, who is usually spot-on in her analysis, again dissented, voicing her concern that inequitable conduct in patent prosecution can be retrospectively imposed by “adverse inference” arising from later misconduct in litigation, without a showing of deceptive intent, which she called “a disservice to the patent practitioner, the patentee, and the public.”

 

While it would be disturbing if the subsequent unrelated conduct of a litigator could retroactively change the nature of the conduct of the patent prosecutors, this is not the case in Regeneron.  The litigation conduct complained of related to resisting disclosures about the alleged inequitable conduct.  If a party is not forthcoming about accused conduct, it seems reasonable to assume that there was something wrong with that conduct.

If Regeneron is used to transmute litigation misconduct into prosecution misconduct, then Judge Newman is right this is a disservice to patentee and their prosecutors.  However, if Regeneron simply means that if you try to hide prosecution conduct, then the courts will presume you had something to hide, the rule should not be a threat to patent owners and their counsel.

Aqua Holds Water; Board’s Denial of Motion to Amend Vacated Because Board Improperly Put Burden on Patent Owner

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In Bosch Automotive Service Solutions, LLC v. Matal, [2015-1928] (December 22, 2017), the Federal Circuit affirmed the Board’s finding of unpatentability of claims 1, 4–15, and 20–22, of U.S. Patent No. 6,904,796, on a remote tire monitoring system, but vacated and remanded the denial of Bosch’s motion to amend as to proposed substitute claims 23–38.

On appeal Bosch primary argued lack of motivation to combine, but the Federal Circuit was bit persuaded, noting that the prior art must be considered for everything it teaches by way of technology and is not limited to the particular invention it is describing and attempting to protect.”  Bosch also argued commercial success, but the Federal Circuit found that Bosch failed to prove commercial success with a nexus to the claims.  In particular the Federal Circuit agreed that a declarant’s “understanding” that the products are covered by the patent was an insufficient foundation.

As to Bosch’s Motion to Amend, the Board rejected Boesch’s proposed amended claims 23–35 as indefinite under 35 U.S.C. § 112, ¶ 2, and Bosch’s proposed amended claims 36–38 as unpatentable over the
prior art.   Among other arguments, Bosch challenged the Board’s rejection of both sets of proposed amended claims on the grounds that the Board impermissibly placed the burden on Bosch to establish patentability.

As to claims 23-35, the Federal Circuit found that the Board impermissibly assigned the burden of proof to Bosch, and vacated the Board’s denial of Bosch’s motion to amend with respect to proposed claims 23–35 and remand for the Board to evaluate the patentability of the proposed amended claims consistent with Aqua Products.  Similarly with respect to claims 36-38, the Federal Circuit found the Board improperly placed the burden of proving patentability over the prior art on Bosch, and vacated and remanded the motion to amend these claims as well.